For some time, there has been much discussion on increasing the minimum wage at both the national and state level, but companies have recently shown that they intend to make sure that the effect on them is minimal. This can cause problems for those who’ve been actively fighting for progress.
There’s no question that income inequality is a serious issue, but the battle to increase the minimum wage has been a contentious one and mistakes have been made on both sides. One problem made by the backers of a minimum-wage increase was fighting for an increase that was too large right away. The present minimum wage at the federal level is $7.25 and proponents have been pushing for an increase to $15 per hour. That increase has to be phased in over a period of five to seven years. If the wage is increased faster, businesses will have to raise prices substantially to maintain their revenues or face a serious reduction in their profit margins.
Another issue is that proponents of the minimum-wage increase have been focusing on the per-hour pay. While there has been success in increasing the wage in several states, if businesses move to reduce hours, whether to minimize the impact on profits or because of a decrease in revenues, the total compensation received by those employees could be much lower than if wages had stayed at their present level.
One big problem is that many employees are vulnerable to losing ground financially if the minimum wage is increased. Wendy’s recently announced it will offer its franchise owners the opportunity to use kiosks to allow customers the ability to order and pay for their food without a cashier, allowing the franchise owners to increase efficiency and also reduce payroll expenses by having fewer employees. Other companies are likely to introduce similar measures as they grapple with the reality of higher labor costs. This is similar to the reaction of the business community when it attempted to avoid complying with the requirements of the Affordable Care Act. Companies hired fewer employees and reduced the scheduling of current employees so they could cover the fewest number of employees possible.
The battle for a higher minimum wage has been ongoing for some time and politicians are responsible for this. They had the opportunity to solve the situation by indexing the minimum wage to inflation. This would have eliminated the need to continuously battle for an increase to counter the lost ground arising from the minimum wage staying the same. Another problem is that the proponents of a higher minimum wage have been focusing their outrage on the parent corporations, such as McDonald’s, instead of the franchise owners, who actually decide the level of compensation they offer their employees.
So far, there have been several victories in the battle for a higher minimum wage in California and New York City, but there’s still no chance of getting an increase in the federal minimum wage passed through a Republican-controlled Congress. The ideal method would be to push for increases at the city and state level in smaller increments of $2 to $3 per hour, which have a much better chance of being implemented. This is the path that should be pursued. It will put more money in the hands of workers and will spare business owners a sharp increase in costs, preventing them from firing employees to stay in business.